SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NUMBER 1-10352
COLUMBIA LABORATORIES, INC.
(Exact name of Company as specified in its charter)
DELAWARE 59-2758596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2665 SOUTH BAYSHORE DRIVE, PH II-B
MIAMI, FLORIDA 33133
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 860-1670
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Number of shares of the Common Stock of Columbia Laboratories, Inc.
issued and outstanding as of October 31, 1995: 25,956,854
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COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements of
the Company have been prepared in accordance with the instructions to Form 10-Q
and, therefore, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial information for the interim periods reported have been made.
Results of operations for the nine months ended September 30, 1995 are not
necessarily indicative of the results for the year ending December 31, 1995.
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets-
Cash and cash equivalents $ 3,152,399 $ 689,749
Accounts receivable, net 798,135 904,277
Inventories 1,292,759 1,117,243
Prepaid expenses 184,745 125,832
----------- -----------
Total current assets 5,428,038 2,837,101
Property and equipment, net 754,117 915,623
Intangible assets, net 1,619,332 1,786,037
Other assets 1,383,540 1,268,803
----------- -----------
$ 9,185,027 $ 6,807,564
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities-
Current portion of long-term debt $ 156,751 $ -
Accounts payable 1,856,900 3,707,966
Accrued expenses 883,193 1,059,960
Deferred revenue 1,120,499 1,540,549
Estimated liability for returns
and allowances 363,929 387,075
----------- -----------
Total current liabilities 4,381,272 6,695,550
----------- -----------
Long-term debt, net of current portion - 6,217,649
Other long-term liabilities 95,315 86,743
Stockholders' equity (deficit)-
Preferred stock, $.01 par value; 1,000,000 shares
authorized;
Series A Convertible Preferred Stock, 1,365 and
1,515 shares issued and outstanding in
1995 and 1994, respectively 14 15
Series B Convertible Preferred Stock, 1,750 and
2,000 shares issued and outstanding in
1995 and 1994, respectively 18 20
Common stock, $.01 par value; 40,000,000 shares
authorized; 25,881,854 and 23,778,897 shares
issued and outstanding in 1995 and 1994,
respectively 258,819 237,789
Capital in excess of par value 72,539,534 64,206,507
Accumulated deficit (68,104,575) (70,853,356)
Cumulative translation adjustment 14,630 216,647
----------- -----------
Total stockholders' equity (deficit) 4,708,440 (6,192,378)
----------- -----------
$ 9,185,027 $ 6,807,564
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 7,970,001 $ 6,735,181 $ 1,886,135 $ 2,857,449
COST OF GOODS SOLD 4,099,040 3,437,705 902,026 1,408,617
----------- ----------- ----------- -----------
Gross profit 3,870,961 3,297,476 984,109 1,448,832
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling and distribution 2,283,150 1,539,068 834,687 461,501
General and administrative 2,273,295 2,298,058 701,241 724,747
Research and development 4,671,182 6,475,016 1,946,097 2,387,594
----------- ----------- ----------- -----------
Total operating expenses 9,227,627 10,312,142 3,482,025 3,573,842
----------- ----------- ----------- -----------
Loss from operations (5,356,666) (7,014,666) (2,497,916) (2,125,010)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
License fees 8,054,883 60,464 - -
Interest income 99,167 43,341 58,962 6,197
Interest expense (166,824) (1,081,971) (26,074) (367,903)
Other, net 118,221 (105,515) 5,714 (40,670)
----------- ----------- ----------- -----------
8,105,447 (1,083,681) 38,602 (402,376)
----------- ----------- ----------- -----------
Net income (loss) $ 2,748,781 $(8,098,347) $(2,459,314) $(2,527,386)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ .11 $ (.36) $ (.10) $ (.11)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 25,326,000 22,231,000 25,726,000 22,294,000
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,748,781 $(8,098,347)
Adjustments to reconcile net income (loss) to net
cash used for operating activities-
Depreciation and amortization 385,433 847,106
Provision for doubtful accounts 51,866 22,168
Provision (benefit) for returns and allowances (2,012) 341,991
Changes in assets and liabilities-
(Increase) decrease in:
Accounts receivable (196,914) 90,103
Inventories (175,516) 791,565
Prepaid expenses 25,004 191,084
Other assets (129,246) (73,927)
Increase (decrease) in:
Accounts payable (1,321,731) 2,797,264
Accrued expenses 94,028 (492,981)
Deferred revenue (138,733) (387,993)
Estimated liability for returns
and allowances (21,135) (195,300)
----------- -----------
Net cash provided by (used for) operating activities 1,319,825 (4,167,267)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (52,671) (150,121)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable and long-term debt (91,954) (37,527)
Proceeds from issuance of common stock 78,147 -
Proceeds from exercise of options and warrants 1,382,569 78,800
----------- -----------
Net cash provided by financing activities 1,368,762 41,273
----------- -----------
</TABLE>
(Continued)
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<TABLE>
<CAPTION>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1995 1994
----------- -----------
<S> <C> <C>
EFFECT OF EXCHANGE RATE CHANGES ON CASH (173,266) 122,269
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,462,650 (5,053,846)
CASH AND CASH EQUIVALENTS,
beginning of period 689,749 5,280,829
----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 3,152,399 $ 226,983
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 24,615 $ 556,197
=========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING AND FINANCING ACTIVITIES:
During the nine months ended September 30, 1995, the Company issued
1,695,232 shares of Common Stock in payment of long-term debt and accrued
interest totaling $6,339,409.
During the nine months ended September 30, 1995, the Company issued
95,000 shares of Common Stock in payment of legal fees totaling $562,500. During
the nine months ended September 30, 1994, the Company issued 5,008 shares of
Common Stock in payment of consulting fees totaling $27,000.
As of September 30, 1995, dividends on the Series A Preferred Stock of
$95,315 ($8,572 relating to the nine months ended September 30, 1995) have been
earned but have not been declared and are included in other long-term
liabilities in the September 30, 1995 condensed consolidated balance sheet.
See notes to condensed consolidated financial statements
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<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed for quarterly financial reporting are
the same as those disclosed in Note (1) of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994. Certain prior year balances have been reclassified
to conform with current year presentation.
(2) ADJUSTMENT OF PRIOR YEARS' FINANCIAL STATEMENTS:
In December 1993, the Company entered into an Option and License
Agreement pursuant to which it was granted an option to obtain an exclusive
license to the North and South American rights to a potential AIDS treatment.
The option cost $2 million, which in accordance with SFAS No. 2, should have
been expensed when acquired in 1993. As a result, the Company has restated net
income (loss) for 1993, 1994 and 1995.
The effect of the restatement is to increase 1993 net loss by $2
million or $(.09) per share and decrease 1994 net loss $400,000 or $.01 per
share. The effect on the 1994 and 1995 per share quarterly amounts is
immaterial.
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<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In May 1995, the Company entered into an exclusive worldwide, except
for South Africa, license and supply agreement with American Home Product
Corporation (AHP) under which the Wyeth-Ayerst division of AHP will market
Crinone(Trademark). Under the terms of the agreement, the Company received a $6
million upfront payment and will receive milestone payments and a significant
percentage of sales. A $2 million milestone payment was received in June 1995,
when Crinone was approved as a drug in the U.K. As a result, cash and cash
equivalents increased from approximately $690,000 at December 31, 1994 to
approximately $3 million at September 30, 1995.
During 1995, the Company repaid $6,339,409 of long-term debt and
accrued interest through the issuance of 1,695,232 shares of the Company's
Common Stock.
The Company is currently in discussions with several pharmaceutical
companies regarding potential product development agreements, in which the cost
of development would be borne by the strategic alliance partner. The Company
expects to receive both upfront payments and ongoing royalties upon consummation
of any such agreements.
There can be no assurance that the Company will be able to enter into
any such agreements or that any upfront payments or ongoing royalties will be
received or, if received, will be sufficient to meet the Company's funding
requirements. The Company's future cash flow requirements are substantially
dependent upon the receipt of such upfront payments and on the marketing efforts
of its strategic alliance partners. If such payments are not received, the
Company will seek to raise additional capital, the success of which is not
determinable. If the Company is unable to raise sufficient additional capital,
the Company will explore the alternatives available to it at such time,
including without limitation, delaying clinical studies or otherwise reducing
its operating activities or seeking other ways to reduce its cash requirements.
In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. The option cost $2 million,
of which $1.1 million was paid in December 1993 and the remaining $900,000 was
paid in February 1994. The potential product was recently granted a Clinical
Trials Exemption (CTX) in the U.K. and clinical trials in humans are now
underway.
The option, which must be exercised upon the occurrence of certain
events, expires in December 1998. Upon exercise of the option, the Company will
be required to pay an additional $5 million. If the Company does not exercise
its option upon the occurrence of certain events, the Company's rights to the
option are terminated.
The FDA, in 1988, initiated a review to determine whether drugs
containing quinine sulfate for night leg cramps, an ingredient in Legatrin,
should remain on the market. The FDA issued a final monograph, which became
effective on February 22, 1995, restricting manufacturer's from selling
over-the-counter quinine sulfate based-products for the relief of night leg
cramps.
As a result, the Company recently introduced New Advanced Formula
Legatrin PM. Legatrin PM(Trademark), which does not contain quinine sulfate,
provides relief of occasional pain and sleeplessness associated with minor
muscle aches such as leg cramps; however, it is not known at this time whether
consumers will find Legatrin PM as effective as Legatrin. Sales of Legatrin and
gross profit derived from sales of Legatrin approximated $4 million and $3
million, respectively, for each of the three years ended December 31, 1994.
Sales of Legatrin represented approximately 49%, 48% and 47% of the Company's
net sales in 1994, 1993
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and 1992, respectively. There can be no assurance as to what future sales of
Legatrin PM will be.
In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met.
As of September 30, 1995, the Company has outstanding exercisable
options and warrants that, if exercised, would result in approximately $18
million of additional capital. However, there can be no assurance that such
options or warrants will be exercised.
Material expenditures anticipated by the Company in the near future are
concentrated on production commitments related to Replens and Crinone and
research and development related to new products. The Company has committed to
spend an aggregate of approximately $850,000 on additional molding capacity at
its suppliers during 1995 and 1996.
As of December 31, 1994, the Company had available net operating loss
carryforwards of approximately $40 million to offset its future U.S. taxable
income. In accordance with Statement of Financial Standards No. 109, as of
December 31, 1994, other assets in the accompanying consolidated balance sheet
includes a deferred tax asset of approximately $14 million (consisting primarily
of a net operating loss carryforward) which has been fully reserved as its
ultimate realizability is not assured.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 VERSUS NINE MONTHS
ENDED SEPTEMBER 30, 1994
Sales have increased in 1995 as compared to 1994 primarily as a result
of Advantage 24(Trademark) now being available on drug store shelves throughout
the U.S., renewed sales activity from the Company's OTC segment, including the
introduction of Legatrin PM, as well as revenue from a research agreement which
began in late 1994. While the strategic alliance agreements in the United States
and abroad have not produced desired unit sales as quickly as planned, the
Company believes it has established effective working relationships with its
partners which the Company believes form a solid foundation to build sales of
Replens and the other products in the development pipeline. In addition, upon
granting of the European multistate license, Replens should become a
reimbursable product in certain countries. The Company believes that sales of
Replens in Europe should increase once the licenses are granted. The Company's
success to a great extent is dependent on the marketing efforts of its strategic
alliance partners, over which the Company has limited ability to influence.
Selling and distribution expenses increased as a result of costs
associated with the introduction of Legatrin PM.
Research and development expenditures have decreased as a result of the
completion of a majority of the clinical studies related to Crinone and
Advantage 24.
License fees, net includes $8 million received as upfront and milestone
payments in connection with the licensing agreement with AHP.
The decrease in interest expense is primarily the result of repayment
of a portion of the 1993 Notes.
As a result, the net income for 1995 was $2,748,781 or $.11 per share
as compared to a net loss in 1994 of $(8,098,347) or $(.36) per common share.
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<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 VERSUS THREE
MONTHS ENDED SEPTEMBER 30, 1994
Sales have decreased in 1995 as compared to 1994 primarily as a result
of the decrease of shipments of product to the strategic alliance partners.
While the strategic alliance agreements in the United States and abroad have not
produced desired unit sales as quickly as planned, the Company believes it has
established effective working relationships with its partners which the Company
believes form a solid foundation to build sales of Replens and the other
products in the development pipeline. In addition, upon granting of the European
multistate license, Replens should become a reimbursable product in certain
countries. The Company believes that sales of Replens in Europe should increase
once the licenses are granted. The Company's success to a great extent is
dependent on the marketing efforts of its strategic alliance partners, over
which the Company has limited ability to influence.
Selling and distribution expenses increased as a result of costs
associated with the introduction of Legatrin PM.
Research and development expenditures have decreased as a result of the
completion of a majority of the clinical studies related to Crinone and
Advantage 24.
The decrease in interest expense is primarily the result of repayment
of a portion of the 1993 Notes.
As a result, the net loss for 1995 was $(2,459,314) or $(.10) per share
as compared to a net loss in 1994 of $(2,527,386) or $(.11) per common share.
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COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain claims and complaints have been filed or are pending against
the Company with respect to various matters. In the opinion of
management and counsel, all such matters are adequately reserved for or
covered by insurance or, if not so covered, are without any or have
little merit or involve such amounts that if disposed of unfavorably
would not have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of November 10, 1995, dividends on the Series A Preferred Stock of
$96,542 have been earned but have not been declared.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on July 20,
1995 for the purpose of electing six directors and ratifying the
appointment of Arthur Andersen LLP as independent public accountants
for the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBIA LABORATORIES, INC.
/s/ MARGARET J. ROELL
---------------------------
MARGARET J. ROELL, Vice President-
Finance and Administration,
Chief Financial Officer
DATE: NOVEMBER 10, 1995
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,152,399
<SECURITIES> 0
<RECEIVABLES> 948,371
<ALLOWANCES> 150,236
<INVENTORY> 1,292,759
<CURRENT-ASSETS> 5,428,038
<PP&E> 1,539,995
<DEPRECIATION> 785,878
<TOTAL-ASSETS> 9,185,027
<CURRENT-LIABILITIES> 4,381,272
<BONDS> 0
<COMMON> 258,819
0
32
<OTHER-SE> 4,449,589
<TOTAL-LIABILITY-AND-EQUITY> 9,185,027
<SALES> 7,970,001
<TOTAL-REVENUES> 7,970,001
<CGS> 4,099,040
<TOTAL-COSTS> 4,099,040
<OTHER-EXPENSES> 9,227,627
<LOSS-PROVISION> 51,866
<INTEREST-EXPENSE> 166,824
<INCOME-PRETAX> 2,748,781
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,748,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,748,781
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
